The Justice Department and three states filed suit against Dean Foods today, alleging that the dairy processor’s acquisition of two Foremost Farms dairy processing plants in Wisconsin last year removed competition in the milk industry.

The lawsuit asks Dean Foods, which is headquartered in Dallas, to sell off the milk processing plants in acquired in the April 2009 purchase.

The Justice Department and Illinois, Michigan, and Wisconsin filed the suit in federal court in Milwaukee, and said that the merger eliminated “substantial competition” in the sale of milk to schools and retailers in those states.

“The purpose of the department’s lawsuit is to restore competition so that schools, grocery stores and other retailers in Illinois, Michigan and Wisconsin, will pay lower prices for their milk,” said Assistant Attorney General for Antitrust Christine Varney, in a press release announcing the suit.

The deal was not originally presented to antitrust authorities for approval because it did not meet the size threshold required for regulatory review.

Sen. Herb Kohl (D-Wisc.) weighed in on the lawsuit: “Maintaining a competitive dairy market is a high priority of mine,” he said in a statement. “If the allegations are proven to be true, today’s lawsuit will result in lower prices for consumers and more competitive choices for dairy farmers in Wisconsin.”

The lawsuit comes amidst the Justice Department’s heightened interest in agriculture. The Antitrust Division confirmed it was conducting a probe in the seed industry last week. And it is hosting a series of town-hall discussions this year with the Department of Agriculture on competition issues in the industry. At Kohl’s request, one of the town-halls will explore dairy issues in Wisconsin.

[...] as farmers in the audience the next day clapped when Varney mentioned the DOJ's antitrust lawsuit against Dean Foods, many realized the debt levels these family dairy farmers have been forced to endure the past year [...]